Lynas CorporationBuilding a New Business and Creating an Organisation that meets its vision

HR Leaders Summit8 May 2013

Introduction

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• Imagine in that environment attempting to attract, on board and train employees at a rate of 1 per day for 2.5 years

• Keeping 360 employees engaged and focussed on building a new industry in an environment where

• You drive to work every day and the car in front of you has a sticker telling people that your employer should not be here

• That your employer is simply using your country to dump radioactive waste

• Where you go to restaurants and are refused service based on what your uniform carrying your employers name

Company overview

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Mount Weld Concentration Plant

Lynas Advanced Materials Plant CLD Rare Earth Deposit

Mt Weld Project and Concentration Plant

LAMP, Malaysia

Primarily involved in the exploration, development, mining and processing of Rare Earth minerals

ASX-listed, market capitalisation of A$1.2bn as of February 27, 2013

Owns and operates:

Mt. Weld – the highest grade known Rare Earths deposit in the world – located 35km south of Laverton in W.A.

Mt. Weld Concentration Plant – commissioned in 2011 and located 1.5km from site

Lynas Advanced Materials Plant (“LAMP”) facility – located in the Gebeng Industrial Estate (“GIE”) near the Port of Kuantan in Malaysia

Phase 1 production capacity of 11,000 tonnes per annum (“tpa”) REO and Phase 2 production capacity of 22,000tpa REO

Location of key assets

Building a fully integrated source of Rare Earths from mine to customers

Lynas’ vision is to be the leader in Rare Earths for a sustainable future

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Production process overview

Vertically integrated operations from mining at Mt. Weld to oxide production at the LAMP

Rare Earths Solution

Mt. Weld Mine & Concentration Plant

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Overview of Australian assets

Mt Weld Project and Concentration Plant

Location of the Mt. Weld Project & Concentration PlantMt. Weld Mine

The highest grade known deposit of Rare Earths in the world

Consists of the Central Lanthanide Deposit (“CLD”) and Duncan Deposit

Located 35km south of Laverton in W.A.

Simple, conventional open-pit mining operation

Stockpiled ore is sufficient to sustain Phase 1 steady state production for 6 years

773kt mined at 15.4% REO (116kt contained REO)

Mt. Weld Concentration Plant

Commissioned in May 2011

Located 1.5km from Mt. Weld mine

Phase 1 capacity: 33,000tpa REO concentrate

Expected capacity including Phase 2: 66,000tpa REO concentrate

Proven REO flotation technology

~15kt of dry bagged concentrate ready for shipment to Malaysia

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CLD is the world’s highest grade known Rare Earths orebody

Recent drilling on the western side of the CLD has increased confidence levels in the resource with a large portion of the resources in the measured and indicated categories

Above a REO cut-off of 2.5%, the CLD has a resource of 14.9mt at an average grade of 9.8% REO for a total of 1,460,000 tonnes of REO

CLD resource category

Ore (mmt) REO (%)¹

Measured 6.9 12.2

Indicated 7.0 8.1

Inferred 1.1 4.6

Total 14.9 9.8

CLD(Lynas)

Mountain Pass(Molycorp)

Duncan(Lynas)

Nolans(Arafura)

Hoidas Lake(Great Western)

Thor Lake(Avalon)

Kvanefjeld(Greenland)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

9.8%

6.4%

4.9%

2.6%2.0%

1.4% 1.1%

Source: Company filings

Note: Figures may not sum due to rounding1 REO (%) includes all the lanthanide elements plus yttrium

Central Lanthanide Deposit

Rare Earth Grade – Mt. Weld vs. some other projectsREO grade (%)

Lynas cut-off grade – 2.5%

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The LAMP facility is strategically located in Malaysia

Stable operating environment and a sovereign credit rating of A3

Gebeng is a hub into Asia with exceptional infrastructure

Located in close proximity to Kuantan deep-water port with bulk material, liquid and container berths

Key reagent products located nearby due to large chemical industry on the east coast of Malaysia

Established supplier / manufacturer network within the Gebeng Industrial Estate

High quality and well-maintained infrastructure and utilities

Access to skilled and competitive labour force

Tax free period granted by the Malaysian Industrial Development Association under “strategic pioneer status”

Malaysia operations – Lynas Advanced Materials Plant

Kangar

PERLIS

LANGKAWIAlor Setar

KEDAH

George Town

PENANG

Ipoh

PERAK

KELANTAN

Kota Baharu

TERENGGANU

Kuala Terengganu

PAHANG

Kuantan

Johor Baharu

JOHOR

[Melaka]

NEGERI SEMBILAN

Seremban

SELANGOR

Cameron Highlands

Kuala Lumpur

T H A I L A N D

M A L A Y S I A

S I N G A P O R E

GEBENGSOUTH SEA CHINA

Tioman

MELAKA

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Future milestones

LAMP continues to ramp up toward Phase 1 nominal capacity (expected Q2 2013)

Commissioning of Phase 2 expected in Q2 2013

Ramp-up of Phase 2 in Q3 2013 in line with customer demand

First feed to kiln achieved in November 2012 First arrival of Rare Earths concentrate from Mount Weld in

November 2012

Initial first feed of concentrate into LAMP rotary kilns in November 2012

Successful commissioning of LAMP cracking and leaching units in January 2013

Initial Rare Earths products produced in February 2013

Lynas Advanced Materials Plant – operational update

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REO demand growth outlook

SectorCAGR

2012-2018 Rare Earths used

NiMH Batteries 3.3% La, Nd

Magnets 10.1% NdPr, Dy

Autocatalysts 6.0% CeFCCs 8.0% LaMetallurgy & FerroSilicon 3.4% CeLa

Phosphors -1.2% Eu, Tb, Y, Ce, La

Polishing 4.8% CeLaUV Cut 3.0% CeOptical Glass 5.0% La, Gd

Other 3.0% La, Ce, Nd, Pr, Sm, Gd, Y

Total demand 5.8%

2015E Expected Global Rare Earths demand by application

Demand drivers – Rare Earth uses

NiMH Batteries10%

Magnets27%

Autocatalysts7%

FCCs16%

Metallurgy & FerroSilicon

13%

Phosphors7%

Polishing11%

UV Cut2%

Optical Glass3%

Other4%

Sep ‘12 Nov‘12 Q1‘13 Q2 ‘13

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Indicative timeline to first sales and operating cash flow

First shipment to LAMP from

Mt. Weld

First feed to kiln

Finished goods

Customer qualification

Commercial shipments and first

sales

First cash from sales

Next steps

Current operational focus is LAMP ramp-up towards Phase 1 nominal capacity

Sales & Marketing focus is on completion of customer qualification process and commencement of commercial shipments

Commissioning of Phase 2 expected in Q2 2013

TOL issued

External ViewStrong cash flows expected in the near term

Nov ‘12

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GFCCommunity

Outrage

International and Local Reviews

IAEA etc

Political Uncertainty Sovereign

Risk Issues

Rare Earth Price Erosion

Malaysian GE13

New Company

Challenges Along The Way – An External Environment that creates Employee Anxiety

The Challenge A People and Culture Perspective.

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• To create and build an organisation that is capable of surviving but also thriving in a changing external environment

• Recruit, On-board, Train new employees • 2009 40 employees; 2013 – 490 employees

• Able to deal with uncertainty and continue to grow willing to take on wicked problems

• Changing Production Parameters, Cost Structures• Sovereign Risk Issues• Social License to Operate

• Focus employee efforts on building a company while at the same time getting ready to Operate a new 800M plant in Malaysia

The Challenge - People and Culture Perspective.

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Biggest Challenge for a start up company

• Align Organisational and Employee Goals in a way that contains employee anxiety” so that employees can focus on goal achievement

• Development of the Organisational Software

• Values, • Organisational Structure, • Role Accountabilities and Responsibilities,• Feedback Mechanisms, Thinking Tools etc

• Organisational Software allows the Organisational Hardware – Plant, Equipment, Financial Systems to Operate

Psychological FrameHuman Behaviour – Seeking New Experiences and Reducing Exposure

to Unpleasant Experiences”

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• Gray believed that personality traits and behaviour could not be explained by classical behavioural conditioning alone.

• Gray proposed a “Biopsychological Theory of Personality”

• Emphasized the relationship between personality and sensitivity to reinforcement systems of Reward and Punishment

• System 1 - Willingness to try something new – New Goal Orientation

• Approach Motivation; Impulsivity, Willingness to try something new) , and

• System 2 - Work to avoid unpleasant outcomes

• Motivation (drive to avoid pain, anxiety, punishment, unpleasant outcomes )

Gray's model of personality is based on two hypothesized brain systems

Gray, J.A. (1981). A critique of Eysenck's theory of personality, In H.J. Eysenck (Ed.) A model for personality (pp 246–276)

Gray, J.A. (1982). The neuropsychology of anxiety: An enquiry into the functions of the septo-hippocampal system

A Biopsychological Frame“Behavioural Activation System”

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Behavioural Activation System (BAS)

• The BAS includes brain regions involved in regulating arousal: cerebral cortex, thalamus, and stratum.

• The system is responsive to conditioned and unconditioned reward cues.

• BAS regulates approach behaviours and is referred to as the Reward System.

Individual BAS Sensitivity

• In general, individuals with a more active BAS tend to be more fun seeking, like novelty, change , are more disposed to goal seeking, will respond to seeking novel or new experiences

A Biopsychological Frame“Behavioral Inhibition System”

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Behavioral Inhibition System (BIS)

• The BI also includes brain regions involved in regulating arousal: the brain stem, and neocortical projections to the frontal lobe.

• BIS is responsive to punishment, novelty, uncertainty, and non-rewarding stimuli.

• BIS regulates avoidance behaviours and is often referred to as the Punishment System.

Individual BIS Sensitivity

• Individuals with more active BIS may be vulnerable to negative emotions, including frustration, anxiety, fear, and sadness

• See the risk in things, try to avoid pain or lower anxiety by mitigating risk

• Anxiety lowered for Individuals with High BIS sensitivity by

• working within prescribed systems and when given work that allows avoidance of something unpleasant – e.g avoid uncertainty in outcomes

Psychological Frame – Mapping to People and Culture Systems and Organisational Culture

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• In an environment that is facing rapid discontinuous change, where social licence to operate and other issues create uncertainty in the workplace

• How do we develop and build an organisation and its People and Culture Processes and Systems in a way that enables employees to remain engaged in the business.

• How do we deal with BIS and BAS sensitivity in a way that allows ongoing Employee Engagement

“The Lynas Way”

“A System to Contain Employee Anxiety”

Viewing HR System Elements with this Frame in Mind – The Lynas Way

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Viewing HR System Elements with this Frame in Mind – The Lynas Way

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BIS Sensitivity - Put decision making at an efficient level (consistent with control and risk management) ; Match human capability to role/task complexity

BAS Sensitivity – Time Span of Discretions – Pushing Accountability and Empowerment within Time Span of Discretion.

BIS Sensitivity – Provides a Frame when the normal gaps in Policy, Procedure and System miss but where people need something to connect to

BAS - Sensitivity

Codifying Breakthrough Thinking and Risk Taking

Provide space for people to try something new

BAS - Sensitivity

Encouraging “Entrepreneurial” and “breakthrough Thinking Approaches” – Higher Levels of Thinking;Spiral Dynamics; Deep Change

BIS Sensitivity

Emotional Safety Creation through Values Based Discussions and EQ toolsets

BIS Sensitivity – Clear Context, Purpose, Quality, Quantity Resources and Timing for Task Work Assignments

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Dimension 1 - The Way We Organise

The Challenge of Leadership

“The difficulty is that we have put ourselves to work in organizations so badly put together as to mitigate against our working together effectively.

We have too many layers, undefined cross-functional working relationships, false concepts of leadership, unclear leadership accountability and authority, chaotic compensation systems, phony performance systems, unfair incentive systems, false notions of capability and its growth, poor career development processes and on and on. It is these systems that have to be mended. The art is to mend them in such a way as to elicit the behaviours we want in the process.”

Source: Elliot Jaques, Requisite Organisation, Cason Hall 1996

Employees come to new organizations from these experiences,

effective and creative leadership and behavior in organizations, requires changing the systems and not by trying to change the people.

Principles of Lynas Way – The Way We Organise

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• Role clarity- Accountabilities and Responsibilities Clear

• Levels of work (Stratums) – Individuals working within their time span of discretion are naturally expected to have lower anxiety

• Task Assigning Role Responsibility (TARR’s) and Task Initiating Role Responsibility – (TIRR’s) – It is clear who can give me work

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Role Clarity

• Clearly Defined Position Descriptions based on application of RACI Mapping across the organisation• Enables people to perform and deliver the required results and behaviour• Ensures people understand how their role and personal performance

contributes to the achievement of business strategy• Specifies real accountabilities able to be measured with clarity• Clarifies interdependencies within and between teams and people – who does

what!• Provides a framework that focuses on accountabilities, authorities and

capabilities required to deliver expected outcomes

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Stratums - Human Nature and Capability

Organizational hierarchy is a natural human phenomenon and forms according to a relatively predetermined formula, based upon human capability

Capability is defined as the extent to which an individual can handle the complexity of any task

A key measure of capability is how far an individual is able think/project into the future

▬ i.e. Each of us have a different starting point, however, the longer time horizon a person has, the more complex roles they are typically capable of undertaking

.Appropriate Structure Contains Anxiety

Allowing Structure to Follow Strategy (Removing ambiguity) and allowing individuals discretion to complete work in a way that fits

their planning horizon

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Levels of Work (Stratums)

Levels of work define the relative complexity of the tasks that make up the work requirements of particular roles in the organisation.

Each level of work:

- Requires a different way of thinking

- Must provide information laterally

- Sets overall Context and Purpose for the Level below

- Allocates tasks to the Level below (direct reports)

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Levels of Work (Stratum)

6 10 - 20 Years Value Delivery

5 5 - 10 Years Strategic Direction

4 2 - 5 Years Strategic Delivery

3 1 - 2 Years Operational Direction

2 3 - 12 Months Operational Delivery

1 0 - 3 Months Operational Execution

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How Flat Should a Structure be?

Role Compression and Effective Organisation

Stated Organisation Structure

A

B

C

D

E

F

G

H

I

J

A

B

C

D

E

F

G

H

I

J

What reallyhappens

I

F

G

H

J

A

B

CD

E

Should be

After Elliott Jacques “Requisite Organisation”; Cason-Hall 1989

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PROJECT ENGINEER

TEAM LEADER

SPECIALIST• Safety• Industrial Relations

OTHER TEAM LEADER

Role Relationships

Task Assigning and Task Initiating

TARR

- only your team leader can assign you tasks (blue box )

TIRR

• if previously agreed, the people in green boxes can initiate certain tasks with you

TEAM MEMBER

Inevitably people perform tasks that are not given to them by their immediate leader.

This can cause concern and confusion with respect to who can ask who to do what - In these situations the employee needs to be given clarity on what type of work can be assigned to them and by whom.

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Dimension 2 - The Lynas Way Work Allocation - CPQQRT

Whenever work is allocated to employees (assigned or initiated) the following information should be provided:

CONTEXTContext gives clarity around why the task exists, by describing the events/activities/changes that have lead to it at this point in time.

PURPOSE Purpose is the objective of what needs to be achieved in relation to the task being assigned and should flow directly from the context.

QUANTITY Quantity is defined as the numeric value attached to any task and represents the amount of what ever has to be achieved.

QUALITY Quality is defined as the standard that has to be met and can be either objective or subjective

RESOURCES Resources are defined as the materials, information, people, money, accountabilities and authorities allocated to the individual to effectively complete the task.

TIME Time is the deadline or time available for completion of the task.

Dimension 2 - The Lynas Way Work Allocation - CPQQRT

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BIS Sensitivity

• Context ,Purpose, Quality, Quantity, Resources and Timing (CPQQRT)

• Reduces Anxiety for BIS ensures that all information and resources for task completion are described on task initiation.

Dimension 3 - Lynas Way – Values and Behaviours

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Values provide a framework that

• provide a sense of certainty in times of rapid discontinuous change

• provide a reference for when the systems, process and procedures that are either immature-under developed or not in place – a typical start up

.

Care RelationshipRespect Integrity Courage

The Lynas Way – Values and Behaviours

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BIS Sensitivity

• Provides a Frame to fills gaps in Policy, Procedure and System and where people need something to connect with.

BAS - Sensitivity

• Explicitly States Organisational Acceptance for Breakthrough Thinking and Risk Taking

• Encourage organisational time and space for people to try something new

Dimension 4 – The Lynas Way People and Relationships

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• Toolsets beyond the Mechanistic

• Cultural Memes, Spiral Dynamics

• Developing the Corporate Heart as well as Minds in Corporate Conversations and when problem solving

• Formalised Training in 21st Century leadership Topics, modelled in project teams and change efforts

• Thinking beyond socialised norms to challenge the role that corporations play in “Shared Value”

• Application of “breakthrough thinking” techniques to creating shared value

• Visioning – “Remember the Future” – pre meditative states to allow access to subconcious problem solving and goal setting

• Shared Value Conversations at the heart of corporate

Dimension 4 – The Lynas Way People and Relationships

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BAS - Sensitivity

• Encouraging “Entrepreneurial” and “breakthrough Thinking Approaches” – Higher Levels of Thinking; Spiral Dynamics; Deep Change

• Feeds Novelty Seeking, Encouraging Attainment of Goals not yet realisable

BIS Sensitivity

• Emotional Safety Creation through Values Based Discussions and EQ toolsets

• Heart as well as Mind Applied to Problem Solving and People Decisions mitigating anxiety potential negative outcomes.

Impact of the Lynas Way on Retention.

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Lynas Labour Turn Over Rates are Respective Industry Benchmarks (2011-Q1 2013)

Labour Turn Over WA

Labour Turn Over MY

0

5

10

15

20

25 23.5

18.9

12.214.2

BenchmarkLynas

http://www.amma.org.au/assets/Policy/Papers/20130227AMMA%20Research%20Paper%20-%20Labour%20Turnover.pdf

Hayes Industry Data – Gebeng Industrial Park – Pahang, Malaysia.

The Lynas Way – An Integrated HR Framework for a “Developing Company Culture”

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